Monday, August 6, 2007

The TSX and the Canadian iShares ETF

Today was one of those rare days where the American markets were open, but the Canadian markets were closed. However, it is still possible to determine how the Canadian markets would have done, had they been open. This post will be about how to synthetically determine the value of the TSX in these occasions.

All you do is take the Canadian iShares ETF, which trades in New York, ticker symbol EWC, and divide that by what the Canadian Dollar is trading at. The Canadian iShares holds a basket of stocks that represent the entire Canadian economy, and is weighted similarly to the TSX.

The blue chart is the iShares divided by the Loonie, and the red is the TSX itself.

I think it is clear that both charts appear exactly the same in all respects. So, let's say that at the close on Friday, you buy $10,000 worth of stock in Canada, and right now, today, you want to know what it would likely be worth. Well, notice at the very extreme top right of the chart, it says, -.55%.

That would mean that your Canadian stocks would have a real value of approximately $9,945 tonight. You can apply the same procedure to any individual stock as well, as long as it is traded in both Canada and the United States. I hope that makes sense, and thanks for visiting my blog.


DC said...

Dear Sir,
How neat! That has never occurred to me! Here’s yet another reason why I like your blog so much—what a pleasure :)

The Word said...

Cute trick...

You do add value

The Word